11 Jul Careful floating stance
Both stocks and bonds are up today, with very little economic news to drive the markets. The stock market opened the day to the downside, but has since recovered nicely after bouncing off of a floor of support. The direction of the stock market will again heavily influence mortgage bonds. Should stocks lose steam and head lower, this would provide much needed support in the bond market. However, if the momentum builds in the stock market it will be a drag on the bond market. With mortgage bonds sitting on a significant floor of support, we are hopeful that we won’t see a break beneath today.
With very little external influence in the markets today, we see no need to rush in to lock. Therefore, we will suggest a carefully floating stance. We are now at the bottom of what appears to be an upward channel. If we break below this, it will be very negative for mortgage rates. However, we could see bonds ride the channel a bit higher, with the likelihood of staying in more of a sideways pattern for a couple days. That would be the ideal movement, as bonds build the strength to push toward the top of the channel at a slow but healthy pace.